What are the rules for using gift funds for a down payment?
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A Purchase Money Second (PM2) Home Loan* is a second mortgage that closes with a corresponding first mortgage from the same lender. The first mortgage covers 80% of the home value and the second mortgage (a fixed home equity loan) covers 10% – meaning you have a down payment of only 10%. A PM2 has advantages for a buyer that doesn’t have or doesn’t want to put 20% down. This type of loan allows you to avoid paying for monthly private mortgage insurance (PMI). Plus, the home equity loan does not have a pre-payment penalty so you can pay it off at an accelerated pace if desired. Lenders may restrict PM2 loans to owner-occupied properties and these are minimum credit score requirements.
What are the rules for using gift funds for a down payment?
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